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HST a prime suspect in home-buying chill

Warranted or not, the HST is taking some of the blame for a slowdown in the the B.C. housing market.

Darryl Dyck/The Canadian Press

As the battle over British Columbia's harmonized sales tax moved in to the courtroom, a real estate industry association cited the HST as a prime suspect behind tumbling home sales in B.C. and Ontario.

But while some homebuyers may have timed their purchases to avoid the HST, it's not possible to quantify how much of the downturn is a result of the tax.

"There are a number of things going on in the market right now - and the introduction of the HST is just one of them," said Cameron Muir, chief economist with the British Columbia Real Estate Association.

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Homebuyers who fuelled brisk sales earlier this year were bracing for the HST at the same time as rising interest rates and tighter lending conditions were also coming in to play, he added.

"The combination of those three certainly gave us the expectation that sales would wane over the summer months," Mr. Muir said. "And I think that it's pretty clear that's occurred."

The Canadian Real Estate Association on Monday said national home sales activity slowed in July, with the decline almost entirely the result of fewer sales in B.C. and Ontario. Month-to-month declines of 14.1 per cent in B.C. and 8 per cent in Ontario accounted for 85 per cent of a seasonally adjusted national decline of 6.8 per cent.

A slowdown in demand in these two provinces had been widely expected in July, as "many purchases were brought forward into the first half of the year in advance of the introduction of the HST," the Canadian association said.

"The HST is still a concern for us and certainly if the homes are priced above $525,000, it's a big hit," said Greater Vancouver Home Builders' Association president Peter Simpson, whose group successfully lobbied the provincial government to hike the threshold for HST rebates on new home purchases from $400,000 to $525,000.

Prospective home buyers can overestimate the impact of the HST, said Rob Grimm, a principal at Vancouver-based homebuilder Portrait Homes - which, like most builders, does not support the tax.

In response to consumer confusion, Portrait uses a spreadsheet to show prospective buyers a "before and after HST" breakdown of home prices. The difference can amount to thousands of dollars but does not necessarily influence buyers' decisions, Mr. Grimm said.

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"I don't think a lot of people have figured it out yet," said Mr. Grimm, whose company sells homes ranging from $300,000 to more than $600,000. "On a $625,000 home, [the HST]only makes a $5,000 difference."

Portrait has been doing "quite well" over the summer, selling eight homes over the last four weeks, he said.

Finance Minister Colin Hansen said the real estate industry helped create this month's housing sale bust by whipping up consumer fears.

"I think there was a profound HST effect because of the perception out there - that was driven by a lot of the advertising in the real estate market - that people had to 'buy now' to avoid the HST, we saw lots of that advertising," Mr. Hansen said.

"I think the industry benefitted from the public perception, some of which they created themselves, that the HST was going to have a huge negative impact on all house sales."

With a report from Justine Hunter in Victoria

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About the Author
National correspondent

Based in Vancouver, Wendy Stueck has covered technology and business and now reports on British Columbia issues including natural resources, aboriginal issues and urban affairs. More

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